BERNANKE: "One myth that's out there is that what we're doing is printing
money. We're not printing money."

"60 Minutes," December 5, 2010

"New research shows that one of the first signs of impending dementia is
an inability to understand money and credit, contracts and agreements."

New York Times, "Money Woes Can Be an Early Clue to Alzheimer's," October
31, 2010

"It would be fair to say that monetary and credit aggregates have not played
a central role in the formulation of U.S. monetary policy since [1982], although
policymakers continue to use monetary data as a source of information about
the state of the economy."

"...Is it really possible for a policy described as 'monetary' to be formulated
and implemented without money playing a central role in it? Indeed, the suggestion
that monetary policy can be conducted without assigning a prominent role
to money seems like an oxymoron - a statement containing apparently contradictory
terms, if not worse: for the literal meaning of the Greek word 'oxymoron'
is 'pointedly foolish.'"

Lucas Papademos, Vice President of the European Central Bank, Open Opportunity
Economic Forum, Washington, D.C., November 1, 2006

"[The rising gold price is] strictly a monetary phenomenon...an
indication of a very early stage of an endeavor to move away from paper currencies....
What is fascinating is the extent to which gold still holds reign over the
financial system as the ultimate source of payment."

"[T]he recent capital inflow [has shown up in] higher home prices. Higher
home prices in turn have encouraged households to increase their consumption.
Of course, increased rates of homeownership and household consumption are
both good things."

"Today, most measures of underlying inflation are running somewhat below
2 percent, or a bit lower than the rate most Fed policymakers see as being
most consistent with healthy economic growth in the long run."

60 MINUTES: "Is keeping inflation in check less of a priority for the Federal
Reserve now?"

BERNANKE: "No, absolutely not. What we're trying to do is achieve a balance.
We've been very, very clear that we will not allow inflation to rise above
two percent or less."

"60 Minutes," December 5, 2010

"The unwarranted assumption that 'creeping' inflation is inevitable deserves
comment. This term has been used by various writers to mean a gradual rise
in prices which, they suggest, could be held to a moderate rate, averaging
perhaps 2 percent a year....Such a prospect would work incalculable hardship....Even
if it were possible to control it so that prices rose no more than 2 percent
a year - the price level would double every 35 years and the value of the
dollar would be cut each generation. Losses would thus be inflicted upon
millions of people, pensioners, Government employees, all who have fixed
incomes, including those who have their assets in savings and long-term bonds...."

"If a policy of active or permissive inflation is to be a fact, then we
can rescue the shreds of our self-respect only by announcing the policy.
That is the least of the canons of decency that should prevail. We should
have the decency to say to the money saver, 'Hold still, Little Fish! All
we intend to do is gut you.'"

Malcolm Bryan, President of Atlanta Federal Reserve Bank, 1956

EXPLANATION OF THE FEDERAL RESERVE'S "QUANTITAVE EASING" OBJECTIVE:

"[T]here is a...prosaic way of obtaining negative interest rates: through
inflation. Suppose that, looking ahead the government commits itself to producing
significant inflation. In this case, while nominal interest rates could remain
at zero, real interest rates - interest rates measured in purchasing power
- could become negative.... Ben S. Bernanke, Fed chairman, is the perfect
person to make the commitment to higher inflation.... [T]he goal could be
to produce enough inflation to ensure that the real interest rate is significantly
negative...."

Professor Greg Mankiw, "It May be Time for the Fed to Go Negative," Wall
Street Journal, April 19, 2009

Mankiw is just the man to recommend such policies:

"[W]hen you look at the mistakes of the 1920s and 1930s, they were clearly
amateurish. It is hard to imagine that happening again - we understand the
business cycle much better."

Professor Greg Mankiw, Wall Street Journal, February 1, 2000

"If it were possible to take interest rates into negative territory I would
be voting for that."

Federal Reserve Governor Janet Yellen, speech at the University of San Diego,
then-President of San Francisco Federal Reserve Bank, February 22, 2010

60 MINUTES: "Do you anticipate a scenario in which you would commit to
more than $600 billion?"

BERNANKE: "Oh, it's certainly possible"

"60 Minutes," December 5, 2010

Note: $600 billion is the amount of money Bernanke has stated he will to print
to buy Treasury securities during "QE2" - Quantitative Easing, Part 2.

The Fed "could theoretically buy anything to pump money into the system" including "state
and local debt, real estate and gold mines - any asset."

Cartoon in Grant's Interest Rate Observer, 2010; Federal Reserve
official is speaking to a boy at his front door.

"The truth is the current Fed governors, together with their crack staff
of Ph.D. economists and market analysts, are as close to an economic dream
team, as we are ever likely to see.... The best Congress can do now is to
let the Bernanke bunch do its job."

Professor Greg Mankiw, Harvard University, New York Times, December
23, 2007. Mankiw was chairman of President George W. Bush's Counsel of Economic
Advisers

60 MINUTES: "Can you act quickly enough to prevent inflation from getting
out of control?"

BERNANKE: "We could raise interest rates in 15 minutes if we have to. So,
there really is no problem with raising rates, tightening monetary policy,
slowing the economy, reducing inflation, at the appropriate time. Now, that
time is not now."

"60 Minutes," December 5, 2010

"There is no validity whatever in the idea that any inflation, once accepted,
can be confined to moderate proportions."

60 MINUTES: "You have what degree of confidence in your ability to control
this?"

BERNANKE: "One hundred percent."

"60 Minutes," December 5, 2010

"Mr. Bernanke has used the analogy of a golfer with a new putter: Unsure
how it will work, he finds the best strategy is to tap lightly at first and
keep tapping until the golfer figures out how best to use the putter. [Quoting
Bernanke]: 'When policymakers are unsure of the impact that their policy
actions will have on the economy, it may be appropriate for them to adjust
policy more cautiously and in smaller steps than they would if they had precise
knowledge of the effects of their actions.'"

Wall Street Journal, October 27, 2010

"We have been living in a fool's paradise.... [If] the central bank creates
money or if you like the phrase better, prints money, I think it can only
do one thing, depreciate the currency."

Former Federal Reserve Chairman William McChesney Martin, before the American
Association of Newspaper Editors, 1968

"We are in the wildest inflation since the Civil War."

Former Federal Reserve Chairman William McChesney Martin, from his farewell
speech, 1970

"Inflation is a means by which the strong can more effectively exploit
the weak. The strategically positioned and well-organized can gain at the
expense of the unorganized and aged."

Note: Bernanke simply assumed his QE2 operation would drive down interest
rates (the bold will). Just the opposite has happened. Federal Reserve
Chairman Martin understood the foolhardiness of such a quest when professors
prodded him to do the same:

"It has been suggested, from time to time, that the Federal Reserve System
could relieve current pressures in money and capital markets without, at
the same time, contributing to inflationary pressures. These suggestions
usually involve Federal Reserve support of the Unites States Government securities
market through one form or another of pegging operations. There is no way
for the Federal Reserve System to peg the price of Government bonds at any
given level unless it stands ready to buy all of the bonds offered to it
at that price. This process inevitably provides additional funds for the
banking system, permits the expansion of loans and investments and a comparable
increase in the money supply - a process sometimes referred to as monetization
of the public debt. This amount of inflationary force generated by such a
policy depends to some extent upon the demand pressures in the market at
the time. It would be dangerously inflationary under conditions that prevail
today. In the present circumstances the Reserve System could not peg the
government securities without, at the same time, igniting explosive inflationary
fuel."

Former Federal Reserve Chairman William McChesney Martin, 1957

60 MINUTES: "If you had a message for the American people in this interview
what would it be?"

BERNANKE: "...I'd say first of all the Federal Reserve is here and is going
to do everything possible to support the economy."

"60 Minutes" March 15, 2009

"Think of all these people, decent, educated, the story of the past laid
out before them - What to avoid - what to do, etc.... - trying their utmost
- What a ghastly muddle they made of it! Unteachable from infancy to tomb
- There is the first and main characteristic of mankind."

Sheehan serves as an advisor to investment firms and endowments. He is the
former Director of Asset Allocation Services at John Hancock Financial Services
where he set investment policy and asset allocation for institutional pension
plans. For more than a decade, Sheehan wrote the monthly "Market Outlook" and
quarterly "Market Review" for John Hancock clients.

Sheehan earned an MBA from Columbia Business School and a BS from the U.S.
Naval Academy. He is a Chartered Financial Analyst.